580. Given the possible relaxation of cross-ownership,
will you buy further into the Scottish radio holdings?
(Mr Cruickshank) If you will allow me to plead my
obligations to the Stock Exchange, etc. We made a statement in
early December that said we then had no intention to bid but qualified
it by the circumstances, and that remains our position. I do not
think it appropriate for me to comment further. Can I generalise?

Derek Wyatt

581. Did you write the letter to yourself?
(Mr Cruickshank) Quite. Why are we four here? John
manages our radio business, our television business, our newspaper
business, and we have another Managing Director

Chairman

582. It is interesting that you have produced
somebody who is responsible for radio because when we had an inquiry
into the BBC they did not produce anybody with responsibility
for radio.
(Mr Cruickshank) In many ways the competition issues
and the regulation and governance of the BBC in radio, even though
it is a very much smaller quantum, is actually more serious than
in television in our view, the impact that the BBC has on our
capacity to serve our audience and make a return to shareholders.
The general point I was going to make is we think we can serve
audiences, advertisers and our shareholders better if we invest
in a range of media. If I can explain why that is the case. We
are ambitious to do that, not least because some of the newer
media, like radio and outdoor advertising, are growing faster
than television but we are constrained, we think unnecessarily
and to the detriment of audiences and advertisers and the economy
as a whole, by the present rules. We would like to continue our
stewardship of ITV in Scotland, but we would also like to build
our radio business and demonstrate that our stewardship of newspapers
in Scotland, and perhaps outside Scotland, could be well performed
without the rules that we are now subject to.

Mr Maxton

583. What interests do you have outside Scotland?
(Mr Cruickshank) Our radio interests are UK wide.

584. Virgin.
(Mr Cruickshank) We have cinema advertising, Pearl
& Dean, outdoor advertising. We have programme production
capacity. We are the sixth largest programme producer for the
national networks. We do not serve just ITV, we serve Channel
4 and the BBC nationally.

585. Do you understand, although you said to
Mr Wyatt that Scotland must not be looked at as a market in the
sense of media products, in terms of new production it is not
a single market but it is a very large market, is it not, which
you are getting a very firm grip on? I think that may worry some
people, particularly in the West of Scotland in terms of news
production.
(Mr Cruickshank) We have a number of interests across
the media which can provide news. We would argue, however, that,
if anything, the competition is even more aggressive. Newspapers
are much more competitive in the UK.
(Mr Hudson) Absolutely. We are facing a battle in
terms of the battle for advertisers and readers from indigenous
Scottish newspapers and from English newspapers which are adopting
different pricing and competitive policies than they do in the
rest of the UK. In addition, our readers can access worldwide
New Yorker magazine, they can have today's Washington
Post, all of that information is available. We would say that
our share of that market is probably falling as audiences fragment
and splinter across that plethora of supply. If anything, the
level of competitive activity is stronger, certainly in newspapers
in Scotland and probably the rest of the UK, and is increasingly
intensifying and we see no prospect of that changing.

586. Can I ask a slightly parochial point on
that. Is it true that the Scottish newspapers almost entire obsession
with Scottish politics now has meant that there has been an increase
in the sale of non-Scottish newspapers within the Scottish market?
(Mr Hudson) Let me try and deal with some of the facts
first, if I may. I am not sure that I would agree with you that
the change in sales has happened in the way it has. I think what
is happening is that the total market, if you like, the shares
between English titles, if I can call them so, and Scottish titles
is shifting. I do not think that one is losing copious sales to
the other. I would also, with respect, differ with you about the
obsession point that you have raised. I would like to think that

587. Oh, come on, with this last week.
(Mr Hudson) It is back to my point about the need
for diversity and the level of competition. The Scottish consumer
when he looks for a Scottish product is looking for something
different from what he would receive in the Daily Mail.
If one looks at the articles that appear in the London Daily
Mail that do not appear in the Scottish Daily Mail,
there are very good reasons for that, because the interests of
the Scottish reader differ, and they naturally are interested
in those decisions that are in the competence of Holyrood. It
would be remiss, it seems to me, not to give that due consideration.
We may get that balance slightly wrong sometimes but the balance
must shift as the changes of devolution begin to become more intensified
and more visible.

588. I thought the Daily Record got it
right when it called it a storm in a teacup.
(Mr Hudson) Perhaps Mr Roy would disagree with you,
but I do not know.

589. Obviously in Scotland, as you quite rightly
say, there is the problem of access for the more remote areas
of Scotland where there simply is not the economic return to be
made from companies investing in it. Do you think that somehow,
therefore, the Government should be putting money into ensuring
that there is broadband access and digital access to the more
remote areas of Scotland?
(Mr Cruickshank) Can I just observe that when one
examines where the disadvantaged are, there will be many more
people in the centre of Glasgow than there will be in the Highlands
and Islands. This is a scattered community that we are aiming
to provide a universal service at an affordable price to, it is
not just the Highlands and Islands. That is point one. Secondly,
it is absolutely appropriate for the state to decide what "universal
service" means from time to time. I think it is far too early
to think about broadband in terms of that definition. What does
that mean? As the lady from AOL was saying, the providers have
not had an opportunity and sufficient certainty to be able to
experiment with what consumers in the UK want, which is a necessary
step for the state, the Government, to say "out of that we
are going to pick the level of universal service in terms of the
network". However, if it did then I am a strong believer
that the private sector should be given the opportunity to be
the provider of universal service. In other words, it should not
just be assumed that it is the province of the BBC, which is usually
the case in this area, but it should be open to tender or even
partnership with the BBC. We would welcome the opportunity to
play a role in that, not just in Scotland but across the UK.

590. You do have this broad scope of media interests
but you are not directly involved at the moment, are you, in any
of the Internet providers or companies? Obviously you have got
your own web sites but are you involved in investment in satellites
or in cable companies or even in BT and ADSL? Maybe we should
have insisted many years ago that BT replaced all their network
with fibre optic rather than allowing them to go down the ADSL
route.
(Mr Cruickshank) Pretty much the only bit of the distribution
network, if I can all it that, that we have physically invested
in is the printing presses and that is for quite good reasons.
We do not invest in the networks. Let us comment on what we do
do using the new networks.
(Mr Hudson) We have all of our newspapers online,
a number of our major TV programmes in terms of news provision
to Grampian, all the STV region also have online versions. We
have also just launched, for example, a jobs web site specifically
for Scotland where our primary competitor is Monster.com, an American
company. What we are involved in is, if you like, content provision
and we are looking to do that within the marketplaces that we
operate. Through Virgin Radio and Virgin Online we are also providing
web site content.
(Mr Cruickshank) We are, I think, the leader through
our acquisition of Virgin and John has led that effort.
(Mr Pearson) We were the first European radio station
to have full-time streaming. According to the authorities around
the world we are still one of the top ten streamed radio brands.
We see ourselves as very much a content provider and the Internet
and other generations of platform are where we need to be to ensure
our access to audiences. We have done very, very successfully
on that.

591. I can listen to BBC Scotland Radio and
watch BBC Scottish News here on the Internet, can I watch STV
News like that?
(Mr Emslie) If you log on to the web site you will
get a digest of the news that day and you will be able to see
the top three stories and there will be video clips on the web
site. We are not yet video streaming the whole programme at the
moment.

592. Can BBC Scotland do that?
(Mr Emslie) Yes, through BBC Online.

593. In fact, they have now totally put BBC
Radio on as continuous.
(Mr Cruickshank) Yes, which brings us back to the
issue of whether a consumer is best served by the present patron
of regulation of activities of the BBC and ourselves. The answer
is no.

594. You and I will disagree on that, as we
have done in the past. Are you investing further in your web site?
I am going to be slightly critical in that I think The Herald's
web site at the moment has become slightly old-fashioned in that
it allows you to watch this day's edition but, except for your
columnists, you cannot read the previous editions.
(Mr Hudson) If I may say so, I think that is a very
fair criticism. We are not able to provide the level of service,
using The Herald site as an example, that we would like
to. There are lots of issues around that but I guess there are
two principal ones. We have got an obligation to our shareholders,
so we have to be able to justify those investments and we have
many competing demands for those investments. As far as newspapers
are concerned I go back to the point that we have a very, very
competitive market and, through The Herald, we faced very
major competitive action last year from The Scotsman in
terms of its price cutting policy.

595. The Scotsman web site is exactly
what I would expect.
(Mr Hudson) Indeed, and they do not have some of the
problems that we might face in terms of obligations to our shareholders,
or have made different decisions about where to devote those resources.
I am conscious of that and I would like to see further development
happening during the second part of this year to address some
of the issues that you have referred to. For example, the fact
that we do not update more regularly is a major disadvantage as
far as that site is concerned, so we would like to change.

596. Can I just raise a question so you can
put our minds at rest on the problems that you did have with Grampian,
with some people in Grampian who believed that you were downgrading
the regional part of that when you took it over. Have you resolved
those problems? Do you believe, however, if you do go to cross-media
ownership and it becomes even more flexible that there must be
some way in which you can ensure that TV companies in particular
provide at least on a local and regional basis?
(Mr Cruickshank) I will ask Donald to answer, but
just to say perhaps the perceived issue, which was our devotion
to regional broadcasting in Grampian and investment, was not a
reality issue. The storm was about the way we were getting there
and the particular impact that had on certain groupings of staff.
(Mr Emslie) Following on from what Don has said, the
ITC acknowledged at the point of coming to discuss Grampian Television
with us that they had no concerns over either the quality or quantity
of broadcasting. Effectively the issue came down to the scheduling
of Grampian only produced programming in the peak hours, and that
has all been clarified with the ITC. There were never any issues
about it, we were happy to work with the ITC to solve the issue.
I would pick up and extend Don's comments about the timing of
this. It was due to a time in Grampian's history when we were
going through quite a lot of change, both in terms of working
practices and technology and staff changes, and it was a very
well orchestrated union campaign in terms of raising it to the
level that it was raised. At the end of the day it was over one
job. All of these issues have now been sorted and I am delighted
to inform you that we have a very forward thinking union agreement
over the next two years and Grampian Television has received significant
investment and wide screen digital technology and new studio equipment
and is making more programmes now than it ever has to, I think,
better public acclaim and critical acclaim.

597. Do you hope that your ex-Chief Executive
will play a leading role in the Communications Bill?
(Mr Cruickshank) Who is that?

598. Gus.
(Mr Cruickshank) I think not.

Chairman

599. We are grateful for what happened at Grampian
but we wondered if it would have happened if this Committee had
not been prompted by Mr Frank Doran to take up the issue. Let
us hope it does not get to that point again.
(Mr Cruickshank) After taking over Grampian, in which
very little had been invested, and this was before the so-called
dispute, significant investment was made, not just in premises
but in outdoor broadcasting equipment and, crucially, in the quantum
of programming made at Aberdeen and in the number of creative
staff. It was in changing the ratio of the creative staff to the
support staff that that industrial dispute arose and became, or
seemed to become, an issue about our obligation to Grampian Television,
which was never in mind to be the case.